No Bad Apples: How to Prevent Corporate Wrongdoing

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Context shapes our decisions, explains Dr. Timothy Devinney of Leeds University Business School. In this Thought Leader post, he identifies how companies and individuals can reduce unethical decisions. NBS Thought Leaders are world experts on sustainability issues, offering guidance on business models for the 21st century.

A day rarely passes without news of corporate wrongdoing: automobile safety faults, lead paint in children’s toys, bribery of officials, environmental damages and so on. These actions occur despite the clear penalties associated with such behaviours and the clear ethical implications.

A Simple Plan to Prevent Wrongdoing

Many see the solution as yet more penalties and regulations. Others call for more ethics training. This discussion ignores the key role of context — our environment — in driving “immoral” decisions and after-the-fact rationales.

The good news: Change the context, and you can change behaviour. The bad news: We must recognize that we ourselves could fall victim to immoral or unethical decision making.

Proof that Context Matters

Two famous examples illustrate the role of context.

  • In the Stanford Prison Experiment, volunteers were randomly assigned to roles as either prisoners or guards and required to live in a makeshift prison on the Stanford campus. Researchers found that regardless of volunteers’ personalities (they were randomly assigned), nearly all the volunteers played to the role: prisoners became submissive and guards became abusive.
  • In the Good Samaritan experiments, researchers told seminary students that they were going to be giving a lecture on the Parable of the Good Samaritan. When the seminarians arrived, the researchers directed them to another building, where they encountered an actor pretending to be ill and slumped in the doorway. The researchers had told some seminary students that they had little time to get to the new location, and others that they had plenty of time. The result: 63% of seminary students who were not time-constrained stopped to help the “ill” person, while only 10% of those in a rush did. Some literally stepped over the actor as they entered the building!

These experiments reveal that free will can be an illusion when roles and contexts demand specific behaviour. They suggest that rather than focusing on making people more ethical, we may need to emphasize putting them into situations where “the right thing” is demanded and expected.

Why Our Intentions Don’t Match Our Actions

These experiments might seem abstract, but they explain a lot of behaviour we see in everyday life, and especially the gap between our intentions and actions. For example, surveys consistently report consumers saying that they will save the planet by purchasing ethically and living sustainably life. But actual purchases reflect little of that enthusiasm, as my colleagues and I showed in the book The Myth of the Ethical Consumer. Individuals are radicals in the context of answering a survey and conservatives in the context of spending their hard earned wages.

Similarly, we hear how individuals will sacrifice salary to work in ethical companies. But experiments on over 2000 workers, from hard-nosed MBAs to hard-bodied construction workers, found few actually sacrificing salary. What people say they would do is nothing like what they actually do when given the chance.

Contexts that Create Wrongdoing

We know what makes for the types of corporate and personal decisions made by the Jeffrey Skillings and Bernie Madoffs of the world:

  •  Stress and time pressure lead to less moral and ethical decisions, as in the Good Samaritan experiment. Good Samaritan researchers J.M. Darley and C.D. Batson suggest that “ethics become[s] a luxury as the speed of our daily lives increases.” When people are pressured to meet quotas, they may cut corners. The Space Shuttle Challenger disaster shows how the pressure to perform leads reasonable and smart people to make catastrophic decisions.
  • Power corrupts. Researchers Adam Galinsky and Joris Lammers found that people who believe they have more power are more hypocritical – believing that they had a right to do things that others did not. They also felt that their rationales were purer and that others’ transgressions were more worthy of punishment.
  • The possibility of publicity improves action. If a decision might be revealed publicly, people are more likely to act in accordance with social expectations (norms). For example, in one experiment, we varied how much we monitored a purchaser. People were more likely to make an ethical product choice when they thought they might be monitored.

We Have Met the Enemy and He Is Us

While we like to believe that Jeffrey Skilling, Raj Rajaratnam and Jérôme Kerviel are different from us and that we would never do what they did, we simply do not know, because we do not know the context in which they made decisions. We are deceiving ourselves when we tell ourselves that ethics in business is different from ethics in other circumstances, or that we are unlikely to transgress.

This view of human nature is stark and uncomfortable. But it also suggests how we can make the best of human nature.

How to Support Ethical Behavior

Companies and individuals should be alert to the aspects of a context that can foster wrongdoing. As discussed above, they should consider stress and time pressure, power differentials, and the importance of transparency.

In addition, simply changing the focus and the goal can lead to very different decision outcomes. One way to do this is by encouraging people to think of themselves in a different role.

For example: people tend not to live up to their ideals of ethical purchasing because the context of purchasing implies that they play the role of consumer. “Consumers” make rational, cost effective and, in many cases, ego-satisfying decisions. If you are acting as a consumer in a purchasing context, your goals are consumer goals.

However, if you are in a different role and context, your goals can change accordingly.  My colleagues and I compared people’s responses to environmental advertising, vs. helping their children with school projects linked to environmental sustainability. When in the role of a parent, people behaved much more sustainably than they did in the consumer role (where they just ignored the advertising). As parents, they reduced their energy usage significantly. Goals related to your child’s education and development prompt very different decisions than if the goal is to be a consumer.

Humans are very good at deceiving ourselves. “We often see the world the way we would like it to be rather than the way it is,” scholar Harry Triandis writes. We select information that confirms our beliefs, and downplay or ignore information that doesn’t.

Every corporate scandal features character witnesses professing shock at what a seemingly “nice,” “normal” and “hardworking” person ended up doing. Ultimately, our views of who we are and why we do what we do are an illusion. To a very great extent, we are manipulated by the contexts and roles that we find ourselves in. It is no simple task to not give into what those rules and context demand.

About the Author

Dr. Timothy Devinney is the University Leadership Chair in International Business at Leeds University Business School (UK). He has published eleven books -- e.g., Managing the Global Corporation (with J. de la Torré and Y. Doz, 2000) and The Myth of the Ethical Consumer (with P. Auger and G. Eckhardt) -- and more than ninety articles in leading journals. He has presented papers and addresses at more than 200 universities and conferences in the last ten years.

In 2008 he was the first recipient in management of an Alexander von Humboldt Research Award (Forschungspreis) given by the German government and was Rockefeller Foundation Bellagio Fellow. In 2008 he was elected a Fellow of the Academy of International Business and a Fellow of the Australia-New Zealand Academy of Management (ANZAM). His research, teaching and public service has been recognised in a number of ways, with numerous best paper and teaching awards. He is a frequent commentator on public events and social issues in the press and various media